Friday, January 20, 2012

Southampton - Saints Alive

“Are we keeping up with you?” That was the chant aimed at Nigel Adkins by Brighton and Hove Albion fans after a particularly ill-advised comment made by the Southampton manager during last season’s League One promotion tussle. As it turned out, Southampton finished second to the Seagulls, but crucially achieved their primary objective of promotion to the Championship.

In truth, that has been one of the few mistakes made by Adkins, whose side currently sits proudly atop the Championship league table, threatening to emulate Norwich City’s feat of back-to-back promotions that propelled then from League One to the Premier League in two seasons.

Adkins’ managerial vision and ability to build a team was established at Scunthorpe United, where he moved up from the role of club physiotherapist to twice secure promotion to the Championship, an impressive achievement on a shoestring budget. After joining Southampton in September 2010, some feared that he would not repeat these accomplishments at a bigger club, but so far they have been disappointed, as the positive momentum has been maintained in the higher tier, largely with the same group of players that got them out of League One.

"Making plans for Nigel"

Not only do the Saints lead the Championship, but they are also the division’s highest scorers, mainly thanks to the experienced forward duo of Rickie Lambert (73 goals since being bought from Bristol Rovers in August 2009) and David Connolly. The midfield creativity is provided by England Under-21 international Adam Lallana, one of the top young prospects in the country, and the Brazilian Guly Do Prado, snapped up from Cesena in Serie A.

For the first time in a while the future looks bright at Southampton, following the acquisition of the club out of administration in July 2009 by Markus Liebherr, a wealthy German businessman based in Switzerland. The football club was days away from going out of business, as the bid from another consortium had collapsed, so it is no exaggeration to say that Liebherr rescued the club. His investment initially provided much needed stability off the pitch and then the funds to start rebuilding the playing squad. Although the new owner sadly passed away in August 2010, his legacy continues to fund Southampton’s recovery.

Before the arrival of the new ownership, it had largely been doom and gloom in recent years for Saints fans, starting with relegation from the Premier League in 2005. This came as a huge blow to a club that had graced the top flight for 27 straight years, finishing as high as eighth and reaching the FA Cup Final (where they lost to Arsenal) just two years earlier in 2003. Further back, they actually won the FA Cup in 1976 (when the competition still meant something), memorably defeating Manchester United 1-0 with a goal from Bobby Stokes.

"Markus Liebherr - international rescue"

Relegation was all the more painful, as the club was taken down by Harry Redknapp (belying his Houdini reputation), who had previously managed bitter rivals Portsmouth. Southampton failed to bounce back, though they came close in 2007, when George Burley’s team lost a dramatic penalty shoot-out to Derby County in the play-off semi-final.

This really stretched the club’s finances, as some players were retained on Premier League wages, and more money was spent in order to mount a further challenge for promotion to the Premier League, but the decline continued apace. After Burley left to become Scotland manager in January 2008, Nigel Pearson took the reins, but the team only avoided relegation on the final day of the season.

Due to the financial constraints, Pearson’s contract was not renewed, as the club went down the route of employing little-known, cheap Dutch managers, first Jan Poortvliet, then Mark Wotte. Although they produced some good football, the need to focus on young players led to inconsistency and the club’s problems were compounded by a further relegation to League One in 2009.

While the 2006 annual report drily noted, “the financial dynamics of today’s football industry mean that it is a priority to be a member of the Premiership”, former chairman Rupert Lowe was somewhat more pithy, describing relegation from the top tier as a “catastrophe”.

"Whoa, whoa, Guly"

From a financial perspective this was undoubtedly true, as the club had to confront a huge reduction in revenue, especially after the parachute payments ran out. This was exacerbated in Southampton’s case by the need to service the mountain of debt incurred as a result of building the new stadium at St Mary’s, which was a luxury they simply could not afford outside the Premier League, especially as crowds started to fall without the attraction of top flight football.

Southampton’s problem was that they continued to operate as a Premier League club without the money. If a relegated club adopts such a strategy, it is imperative that they return to the lucrative top tier within a short timescale or they will be in trouble financially (unless they have a benevolent benefactor) – and that’s exactly what happened to the Saints.

They have attempted to shore up the finances by selling players, but that sent them into a vicious circle, whereby they sold players to raise the funds needed outside the Premier League, but that reduced their chances of getting back to the Premier League, as they then had to rely on less talented players plus youngsters from their Academy. The club’s directors appreciated this dilemma, “player sales will undoubtedly diminish Southampton’s prospects of achieving promotion”, but they had few other options.

The player sales took a couple of distinct stages. Initially, many players left straight after relegation from the Premier League, including Peter Crouch, Antti Niemi, Kevin Phillips and Nigel Quashie.

"It's Hammond time"

Thereafter, top clubs continually plucked youngsters from the Academy, most notably Theo Walcott and Gareth Bale. Former chairman, Michael Wilde, explained, “It is not beyond the realms of possibility that at some stage in the future we will be required to dispose of some of our better young players in order for the club to satisfy its banking covenants.” These financial problems were emphasised when Southampton later gave up millions of fees contingent on future appearances of Walcott and Bale in return for early payment.

This was just one example of the financial incompetence that plagued the club, partly as a result of almost continual boardroom infighting. Much of the blame for this has been attributed to Rupert Lowe, who was chairman for 10 years before resigning in June 2006 “in the hope that it would bring unity” to the club.

The hockey loving Lowe cut a rather bizarre figure at the football club. On the plus side, he delivered a magnificent new stadium, but this over-extended the club and was at the price of investing in the playing squad, which was certainly a contributory factor to the disastrous relegation, hence many fans’ obvious dislike for him. Ironically, for a club that ended up in debt trouble, it may have made more sense to spend a little more on players to have a better chance of staying in the Premier League.

"Adam Lallana - eat to the beat"

The other charge against Lowe is that he meddled far too much in the club’s football management, making numerous changes during his tenure, including some truly inexplicable appointments. The idea of recruiting England’s World Cup winning rugby coach, Clive Woodward, as Technical Director, to join forces Harry Redknapp, the ultimate old school manager, was just one example of this idiosyncratic approach.

Lowe’s board of directors was replaced by the authors of the manifesto, “Saints: Planning for Success”, including the club’s largest shareholder, Mike Wilde, who became chairman of the football club, while Ken Dulieu was appointed chairman of the holding company. They were later joined by Leon Crouch, the second largest shareholder, who became acting chairman (yes, another one) for a few months in 2007.

Yet another twist in this tortured tale came in May 2008, when Lowe teamed up with his former foe, Wilde, and returned as chairman of the holding company. He blamed the previous board for the club’s financial woes, asserting that the large player sales were a sign of their mismanagement, though he neglected to mention the impact of the significant revenue reduction following relegation, which occurred on his watch.

"Kelvin Davis - twist and shout"

In fairness, he did have a point, as Southampton should have done much better, if you consider the financial advantages they enjoyed compared to other clubs in the Championship, such as large crowds, all that money from player sales and parachute payments.

Notwithstanding Lowe’s strident criticism of his predecessors and indeed the club’s Corporate Statement (“to establish and maintain Southampton football club as a financially robust business”), the new board fared no better and it was clear that the club was struggling.

This was echoed by the auditors, who in the last published accounts (2008) of the former holding company, Southampton Leisure Holdings Plc, warned of “a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.” In particular, they noted that the company was “reliant on the continuing support of its bankers and loan note holders.”

"Put a Cork in it"

Despite the board “working tirelessly to bring our costs more into line with our dwindling revenues”, there was little doubt that additional investment was required. The finance director hit the nail on the head back in 2007, “Our financial position remains precarious and reliant on recapitalisation or promotion, or preferably both.”

There were expressions of interest from some investors, e.g. in April 2007 it was rumoured that Paul Allen, the American entrepreneur who formed Microsoft with Bill Gates, might launch a takeover bid, while an actual offer for 55% of the shares was received from hedge fund, SISU Capital, in October the same year, though that group subsequently acquired Coventry City. Given the Sky Blues’ travails, that might be considered a bullet missed.

The trigger for the club entering administration in April 2009 was Barclays’ decision to reduce its overdraft facility. For at least two years the bank had intimated that they would not passively sit by and watch the liquidity position deteriorate, but Lowe still attacked them for “sentencing the club to financial death.” However, given that this facility was reportedly cut by just £1 million (from £5 million to £4 million), that indicates just how delicate Southampton’s financial position was. Either way, Lowe admitted that administration was the best way to ensure the club’s survival, hoping that it would attract investment.

"Fonte of wisdom"

Lowe then resigned from the board for a second time with the club having debts of around £30 million. The majority of this was the £24 million owed to Aviva (formerly Norwich Union) for the construction of St Mary’s with most of the remainder being the Barclays’ overdraft. Wages were paid late for a couple of months, while the club relied on the support of its creditors and fans, whose Save Our Saints campaign raised £130,000.

Money was also raised via a fire sale of some players (Andrew Surman to Wolves for £1.2 million, David McGoldrick to Nottingham Forest for £1 million and Nathan Dyer to Swansea City for just £400,000). Inevitably, when a football club is in trouble, other clubs take advantage of this fact by paying less than players are actually worth.

Another negative result of administration was that the Football League imposed a 10-point deduction to be applied the following season in League One after Southampton’s relegation. Although the club protested that this penalty should not apply, as it was the holding company that went into administration and not the football club itself, the League rejected this argument, ruling that they were “inextricably linked as one economic entity.” Significantly, this deduction was enough for the Saints to miss out on the 2009/10 play-offs by one place.

"Jos Hooiveld - Dutch courage"

It also proved an insurmountable barrier for the Pinnacle Group, a consortium fronted by former Saints legend Matthew Le Tissier that had expressed interest in acquiring the club. They had gone as far as paying a £500,000 non-refundable deposit that gave them 21 days exclusivity to tie up a deal (and also allowed wages to be paid), but withdrew from the race, as their backers would not accept the points deduction.

Just as it looked like the club would have to fold, the cavalry arrived in the shape of Markus Liebherr, whose DMWSL 613 Limited acquired the share capital of the football club (and other group companies) from the administrators of Southampton Leisure Holdings Plc on 8 July 2009. Not only did the new owner save the club, but he also paid the debts in full, as opposed to many new owners who only pay a few pennies in the pound for debts owed, leaving many small business and public authorities out of pocket.

Liebherr’s initial statement was equally encouraging, “I believe we have a superb opportunity to rebuild this great club. This will require resources, planning, hard work and patience. We should not expect instant success, but our fans, employees and stakeholders can expect 100% commitment from me and my team.”

Importantly, Liebherr cleared the debts to the bank, tax authorities and trade creditors as part of the acquisition, replacing them with a £20 million shareholder loan that is not repayable for at least five years. This gives Southampton a major advantage compared to many other clubs that are still burdened by debt. Indeed, Football League chairman Greg Clarke has stated, “Debt’s the biggest problem. If I had to list the 10 things about football that keep me awake at night, it would be debt one to 10.”

So, the club is now financially stable, even after Liebherr’s death. His estate “is committed to the continued investment in order to achieve success for Southampton football club.” Although nobody should expect the new owners to throw money around, they have ambitious objectives, as outlined by current chairman, Nicola Cortese, “The plan remains the Premier League by 2014.”

Cortese is a key figure at the club, though has received mixed reviews. His background providing services to the sports industry at Swiss banks has not always enamoured him to the English football community, especially after he sacked manager Alan Pardew just three games into the 2010/11 season, even after he won the Johnstone’s Paint Trophy. This has been compounded by excluding press photographers from the stadium and a number of spats with former players. That said, few could argue with the club’s progress over the last two seasons.

Looking at the losses reported for the last few years highlights the need for change, as the last time that the club made a profit was in 2005. Even then, this was only £0.2 million and would have been a loss without an exceptional gain of £3.1 million from the sale of the old Dell stadium.

It’s a somewhat confusing company structure, but essentially the full picture is revealed at the holding company level. Although this entity owns many companies, the principal activity of the group is the football club, as can be seen in 2010, when the figures were quite similar: loss – holding company £9.1 million, football club £7.8 million; and revenue – holding company £14.8 million, football club £14.3 million.

Unfortunately, no accounts were produced for the holding company in 2009, because of the administration, but the football club continued to publish its figures, so we can get a reasonable idea of the trend. However, there’s another complication here, as the growth in revenue from £8.9 million to £14.3 million in 2010 is largely due to season ticket revenue being transferred from St Mary’s Stadium Limited. The other factor to be noted en passant is that the accounting close date was changed in 2006 from 31 May to 30 June, so that year includes 13 months.

Whichever way you slice the figures, they don’t look very good, especially as they have been boosted by hefty profits on player sales. This was particularly the case in the three years following relegation from the Premier League, when the club made £31 million from this activity, which is a vast amount compared to the £64 million of revenue in the same period. Major sales in that period included Crouch to Liverpool, Walcott to Arsenal, Kenwyne Jones to Sunderland and Chris Baird to Fulham.

Effectively, player sales have helped cover structural deficits. Put another way, the reported losses would have been much larger without these player sales, as can be seen in 2009 and 2010 when less money was raised from the transfer market.

Of course, the major problem for Southampton has been the declining revenue, which has fallen by two-thirds (or £30 million) from £45 million in the Premier League in 2005 to £15 million in League One in 2010. The majority of that (£19 million) hit them immediately in 2006 with the remainder coming two years later after the parachute payments ran out.

As the accounts state, “The principal risks are associated with the performance of the team and the league in which the football club operates, as revenues, particularly those from broadcasting, are substantially lower when the club is in the lower leagues.” This is equally true for match day income and commercial revenue.

That said, even after the double relegation, Southampton’s revenue was still fairly impressive. Indeed, their 2009/10 revenue of £15 million, when they competed in League One, would have placed them around the middle of clubs in the Championship that season, despite that division’s far superior TV deal.

Obviously, this particular ranking is distorted by the impact of money from the Premier League, either through direct funding or parachute payments, but we can safely say that all other things being equal Southampton will have one of the highest revenue generating capacities in the Championship. It is also worth pointing out that their League One revenue was higher than QPR and Swansea City, who both secured promotion to the Premier League the following season.

Southampton’s television revenue has been decimated from £20 million in their last season in the Premier League to around £1 million in League One. Although the pain was initially eased by two annual parachute payments of £6.5 million, they still lost £12 million on relegation. The impact was most noticeable in 2008, even though the Championship introduced a £1.3 million solidarity payment from the Premier League.

At the risk of stating the obvious, there is never a good time for a football club to be relegated, but it is fair to say that Southampton’s timing was particularly bad, as they missed out on the significant growth in TV deals, e.g. West Ham received £40 million for finishing bottom of the Premier League last season compared to Southampton’s £19 million in 2005. Similarly, while Southampton’s relegation was cushioned by £13 million of parachute payments, West Ham will receive £48 million (£16 million in each of the first two years, and £8 million in each of years three and four).

The good news is that Southampton’s TV revenue for the current (2011/12) season will be considerably higher than League One, approaching £6 million. This is mainly sourced from the Football League central distribution of £2.5 million that is made to all clubs, a £2.2 million solidarity payment plus facility fees payable each time the club is televised live.

However, the new Football League three-year TV deal that kicks off in the 2012/13 season will be £69 million lower than the current contract at £195 million, a reduction of 26% or £23 million a season, reflecting what Greg Clarke called, “a challenging climate in which to negotiate television rights.” As there was no interest from BBC, ITV or even ESPN, the only game in town was Sky, who could get away with a much lower bid. The annual reduction for each Championship club has been estimated at £766,000 by Ipswich chief executive, Simon Clegg.

Match day revenue has also slumped from £17 million in 2005 to £10 million in 2010, due to a combination of lower attendances and reduced ticket prices (e.g. cut by 20% in 2008), though the impact was partially offset by the greater number of home games in the lower leagues compared to the Premier League. In addition, match day hospitality and catering has also fallen – it was virtually halved from £2.4 million to £1.3 million following the Premier League relegation.

Attendances dropped from nearly 31,000 in the top flight to less than 18,000 in the annus horribilis of 2008/09, when corners of the ground were shut in a bid to save money, but they have been on the rise ever since the club’s rebirth. Indeed, their average of 21,161 last season was not only by far the best in League One, even way ahead of Sheffield Wednesday, but was actually the 25th highest in England, which is very impressive for a team in the third tier and highlights the club’s potential.

As does the splendid St Mary’s stadium, though this has been something of a double-edged sword for the club since the move in 2001. The £32 million cost of constructing the new ground was one of the primary factors behind Southampton’s financial difficulties, so much so that the local council at one stage entered into negotiations to buy it, but it now offers hope for future progress.

It was clear that the club would have to move from the 15,000 capacity The Dell, as this was a long way below Premier League standards, but there were worries that the club would struggle to fill the 32,690 capacity stadium, especially as this was higher than Southampton’s record crowd at the time. Nevertheless, in the last season in the Premier League, attendances never fell below 30,000. The record attendance of 32,152 was established just last October against Championship rivals West Ham in another indication that the club is on the up.

"St Mary's prayer"

All commercial revenue streams are also down contributing to a reduction in income from £7.4 million in the Premier League to £3.2 million in League One, which was not exactly what the club intended in 2006 when it “restructured the commercial side to maximise off-field earnings.”

The club’s long-standing shirt sponsor Flybe ended their deal in 2010, describing their four-year association with the club as a “rollercoaster of a ride”. Thanks to its stronger financial position, Southampton opted to play in a shirt free of sponsors in the 2010/11 season, when they celebrated their 125th anniversary with a rather wonderful red sash on a white shirt. This season, Umbro have returned to the traditional red and white stripes, with the club signing a three-year sponsorship deal with Aap3, a Southampton-based business and IT Solutions provider. The financial terms of the deal have not been officially divulged, but Sports Pro Media reported that it was worth $300,000 (just under £200,000) a year.

When Southampton were in the Premier League, their wages to turnover ratio was a very respectable 59% (using figures from the football club), but this shot up following relegation to a very worrying 105% in 2008, though it has come down to 83% in 2010. Even though Southampton have managed to more than halve the wage bill from £26 million in 2005 to £12 million in 2010, partly as a result of wage cuts due to relegation clauses in player contracts, the problem is that revenue has plummeted by £30 million in the same period.

In 2008 the wage bill actually increased following the signing of experienced (and higher paid) players and a large number of loan deals, not to mention termination payments of £0.6 million to former directors. That’s the other side of the coin when a club consistently sells its young talent: if they are replaced by older players, their salaries are invariably higher.

Wages also rose from £11.4 million to £12.3 million in 2010, which is hardly surprising given the remarkable growth in headcount: football – from 117 to 153, administrative – 48 to 60. As the costs increased by less than £1 million, the implication is that either average salaries are falling or the new employees were recruited towards the end of the accounting year.

Assuming that the wage bill remains at the same level (though it will probably have risen in the Championship), revenue would have to grow by £5.6 million to produce a wages to turnover ratio of 60%, which is not out of the question, particularly with higher TV deals and better crowds.

In addition, the holding company accounts reveal that one director was paid £600,000 in 2009/10. This is widely believed to be Cortese, who was appointed as a director on 15 December 2009, so this would imply an annual salary of well over £1 million, though a club spokesman stated that this represented remuneration for a whole year. This might sound a bit “toppy” for a League One football club, but in fairness the chairman could easily match or surpass that in a Swiss bank.

Southampton have been a selling club for a long time with net sales proceeds of £56 million in the last nine years, as purchases of £41 million were more than compensated by £97 million of sales. The impact of relegation from the Premier League is evident with purchases of £30 million in the three years before that unfortunate event, but only £22 million in the following seven years.

The analysis is a little misleading for the period since the Liebherr takeover, as the net figures are distorted by the large £12 million fee paid by Arsenal for Alex Oxlade-Chamberlain in the summer. Excluding this one transfer, the new owners have splashed out around £5 million in the last two seasons to drive their promotion bids.

Nevertheless, they can hardly be accused of simply spending their way towards success, as their net spend over the last three years is in fact one of the lowest in the Championship, a long way below the likes of Birmingham City, Leicester City, Nottingham Forest, Burnley and Brighton.

This relatively low expenditure also helps explain why player amortisation, the annual cost of writing-down the cost of a player’s transfer over the length of his contract, has fallen from £7.6 million in 2005 to £1.8 million in 2010.

The balance sheet of DMWSL 613 Limited, the snappily named new holding company, shows net liabilities of £9 million, but a few points need to be considered here, most importantly that the principal indebtedness is the £20 million loan from the owners. In addition, the players are only valued at £3.8 million in the accounts, including nothing for those developed in the Academy, while their market value in the real world is much higher - £19 million according to the respected Transfermarkt website.

Furthermore, the stadium is only valued at £9.5 million, including £3.4 million of land, after an impairment charge of £17 million was booked in the subsidiary St Mary’s Limited following the “distressed sale circumstances”.

On the other hand, the notes to the accounts reveal that there are contingent liabilities of £7.5 million: (a) £3.5 million transfer fees to other clubs dependant on number of appearances and international debuts; (b) up to £4 million to a former creditor if the club is promoted to the Premier League before 2015/16.

It is clear that the owners’ support is still crucial for Southampton’s finances. In 2010, there was a cash outflow of £13 million plus repayment of £4 million of old loans before the books were balanced by the new £20 million shareholder loan. No accounts were published for the holding company in 2009, but 2008 should have set alarm bells ringing, as the net cash outflow was £9 million, even after raising £7 million from player sales, which was completely unsustainable.

So, Saints’ fans are fortunate that they now have such a wealthy owner. Indeed, the magazine Four Four Two had the Liebherr family at number five in their 2010 Football Rich List with a fortune of £3 billion, only behind Sheikh Mansour (Manchester City), Lakshmi Mittal (QPR), Alisher Usmanov (Arsenal) and Roman Abramovich (Chelsea).

There has been some speculation that others might want to invest in Southampton now that their prospects have improved, but Cortese has firmly stated that “the club is not for sale.” He also maintained that Liebherr’s death would not derail their plans, “Nothing has changed. This is a long-term project. This was never a financial transaction. It was done with the strong belief that we can achieve something here which is going to be special.”

"Cortese - the Italian job"

This would be reinforced if the owners were to convert their loans into equity, as Mansour has done at Manchester City, but to date they have lived up to their promises. In any case, Cortese says that there would be other options if the Liebherr family decided to exit stage left, “If there's any lack of commitment, we have a plan B. I know people with money who would have the same attitude as Markus who would join us on this. But, just to underline, the commitment of the family is 100%.”

The foundations for the future have been laid with Southampton’s highly successful Academy, which has an impressive rack record in developing young talent, such as Walcott, Bale, Oxlade-Chamberlain and Lallana. Their facilities are among the best in the country, but they are investing more money to produce a state-of-the-art complex with the aim of replicating the success of Barcelona’s famous La Masia. That does not mean a string of titles, but to have half the first team coming from the Academy, according to Les Reed, the head of football development (and briefly Charlton manager in 2006).

"Oxlade-Chamberlain - give youth a chance"

Southampton spend over £2 million a year on this facility, but it looks like money well spent, as the production line continues to churn out promising players. The current crop includes James Ward-Prowse, who has already appeared for the first team, England Under-17 internationals Luke Shaw and Calum Chambers, plus Harrison Reed and Jake Sinclair.

It is too early to say what impact the new Elite Player Performance Plan (EPPP) will have on Southampton’s youth policy, but it does appear that the days of a young star moving for large sums might be coming to an end, which on the face of it would hurt the club’s finances. However, it is believed that Southampton will be one of the few academies classified as Category One, so the club might end up being a beneficiary of the new system.

If Southampton remain in the Championship, they will also be affected by the introduction of new Financial Fair Play regulations from the 2012/13 season, so they will need to balance their books fairly quickly. They should be reasonably placed for this, given the higher revenue in this division and their ability to make money from player sales, especially as they will be able to exclude costs for their stadium and academy from the break-even calculation.

Of course, it will be a whole new ball game if they gain promotion to the Premier League, where the TV money is worth at least £40 million a season. Although there is a concern that the club might eat into that higher revenue by increasing wages and other costs, the net effect is still likely to be positive. If we look at the three teams that were promoted to the Premier League in 2008/09 (using the last available figures from 2009/10), we can observe this phenomenon with Wolverhampton Wanderers, Birmingham City and Burnley, but all three of them still went from operating losses in the Championship to profits in the Premier League.

"Rickie, don't lose that number"

This explains why Southampton might splash a little cash in the January transfer window. They have already signed Japanese international striker Tadanari Lee and Spanish Under-21 international midfielder Yago Falque from Tottenham on loan, but there are also reports that they have offered an incredible £6 million to Celtic to re-unite forward Gary Hooper with Adkins, his former manager.

The weight of expectation hangs heavily on Southampton, but they have as good a chance as any of making it, as summed up by the administrator when the club was bought, “Markus Liebherr was attracted to Southampton by a number of qualities which include the club's rich sporting heritage, loyal fan base, first-class stadium and training facilities and the potential for the Saints to regain their rightful place in the higher echelons of English football.” That would be a fantastic prize for the club’s long-suffering fans. For the time being, they’re happy enough just to be once again more saints than sinners.

A very interesting piece on the recent history of Southampton Football club. I think you have been a shade lenient on Lowe though. From the day he took over he promised he would bring high investors into the club and held back a high percentage of shares to accommodate this. This did not happen although he said he was constantly trying to acquire investors.Like a lot he promised he did not deliver and should have resigned after about 3/4 years into his reign as chairman. Again I say though not a bad article!

Hi Swiss Ramble. As a long term (but silent) reader of your website and season ticket holder at SFC (through all the bad times) I have been hoping that you would find the time to write about the Saints, and you did not disappoint. Thanks for writing a really good article about us!

I'm glad you've shown that there are still some concerns surrounding our finances, although compared to most Championship clubs we're in a great position. It's so difficult to find a balanced (or even remotely accurate) assessment of any club's financial situation, let alone ours.

The Lowe/Wilde ownership will always be resented by fans for gambling on underinvestment when in the Premier League and for gambling on overspending after relegation.

Cortese seems to be a remarkable competent, if rather prickly, character. His back-room and managerial appointments have all been first rate, and the decision to invest further in our Academy can only bode well for the future - especially with the advent of the EPPP. Adkins certainly seems to be the right man for the job, as good as Pardew evidently is I think our new man is better, he has us playing the kind of sophisticated football that is bringing success to Norwich and Swansea (both clubs you identified as having less spending power than we do) and we have seen so many of our players improve significantly under his stewardship. I can't wait to see Tadanari Lee in action.

For the first time since Strachan's brilliant 8th place finish and our FA cup defeat to Arsenal there is a palpable sense of optimism surrounding the club. It's certainly a great time to be a Saints fan - we are genuinely excited about the future.

Very intersting read, with a few points I - as a Saints fan - was unaware of.Any chance of a similar article on the affairs of our near neighbours covering the same time period? Or do you not do fiction? ;)

To those pointing out that Southampton's highest finish was 2nd, thanks, but I am well aware of that.

What I actually wrote was, "finishing as high as eighth and reaching the FA Cup Final (where they lost to Arsenal) just two years earlier in 2003". In other words, Saints finished 8th in 2003, just 2 years before they were relegated...

A question about holding companies. I have noticed from your blog that quite a few clubs have 2 sets of accounts, 1 for the club and another for the holding company.

Other than skimping on taxes by basing the holding company in a tax haven, are there any other reasons why certain clubs use this ownership structure? In some cases, the club is the only asset and it seems pointless to have 2 sets of accounts.

An interesting read that blows apart the myth that sfc are a well run club. Hemorrhaging money every year, they're only propped up by a wealthy owner who has merely turned debts owed to other people into a debt owed to his family.

Most of this debt has been generated by building a ground they clearly could not afford. One thing missed in the article that I'd be interested to know- how much did Aviva write off on the money owed to them on the stadium mortgage? £16m?

Either way, if they're not promoted to the Premier League this season, the owners family will need to dig deep again to bail them out, otherwise administration will surely loom large on the horizon once again....

Lowe is much maligned and rightly so. But for me, it should be his capability not for his intentions, that should be criticised.

He saw an opportunity to lead from the front when clubs saw a future in floating on the stock exchange. For saints part this was engineered by his reverse takeover from his nursing home business.

For there on he attempted to run saints as a profitable business with the expectation of increasing the numbers of small investors. Saints PLC provided dividends to investors when they weren’t really there, again in an attempt to stimulate investment. None of this worked. Saints PLC even purchased its own shares to bolster the share price, and attract investment. Again it didn’t work.

For me the most masterful failure was mortgage agreed for the construction of St Marys.

My understanding is that we agreed a contract with extremely harsh additional payments clauses to “minimize” running costs this meant that we where spending £1+ a month on a £27m mortgage (we received a reported £5 payment for naming rights?).

This means that while we netted a profit on player sales of £41m not of this could go towards the reduction of our largest debt which of course would have significantly reduced our running costs

Lowe was quoted as saying that this mortgage would not be paid of in his lifetime! When we went into admin administration we still owed £24m despite paying at least £12m for 7 seasons?

Very interesting. Whilst some have said you have been lenient on Rupert Lowe, I disagree.

In terms of managers, I believe he made one unforgivable mistake, in appointing Steve Wigley. Stuart Gray was a mistake, but an understandably loyal move following Hoddle's departure. Lowe then acted swiftly with a very unpopular move in appointing Gordon Strachan, which was a masterstroke. Paul Sturrock and Harry Redknapp were both errors, but ones which at least at the time had their merits and too many critics fall foul to the benefit of hindsight. And as for Clive Woodward, I think it is the naivety of football fans that this would be criticised so much. Woodward is an intelligent man who may have had good ideas, and also someone who managed a squad of men to a World Cup win in a team sport. However, it was just the excuse Harry Redknapp needed to walk away and absolve himself of blame, as he likes to do at any opportunity.

As much as I miss the Dell, and believe that the move to St Mary's has caused a loss to the old 'Spirit of Southampton', it was a necessary move and I don't think it is right to criticise Rupert Lowe for achieveing this move. Saving on the stadium and investing in players would be short-termist, and that rarely yields dividends in football (or in fact in many walks of life).

It's all very well saying we should have invested more to stay in the Premiership, but spending is no guarantee. The only thing spending heavily guarantees is that IF you go down, you're in trouble. Relegation was a disappointment, but the club seemed to still be in reasonable shape. Our mistake was to effectively gamble on getting back there, a bit like Leeds gambling to get back into the Champions League a year or two earlier.

Given your in-depth review of the club, perhaps you could clarify something which has irked me for some time:

Was Rupert Lowe chairman when Southampton splashed the cash on a load of players in the Championship in an attempt to get promoted (e.g. Rasiak, Idiakez and many more)?

If my memory serves me correctly, Lowe stepped down, and it was the new class of Wilde/Dulieu/Crouch who resided over the Championship-spending period, yet this is overlooked by many Lowe-haters. I'd like to know either way.

Particularly pleased to see our net transfer spend so low, as I desperately don't want us to buy success like Man City, and feel we are unfairly lumped in as a club who does so. Our investment in training facilities and youth development is a superb statement that Southampton are at least going to TRY and be a well run club and do things the right way, and I am very proud of that.

Praise for The Swiss Ramble

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